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On November 8, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s order denying a private Israeli company’s motion to dismiss claims based on foreign sovereign immunity. The Israeli company (defendant) designs and licenses surveillance technology to governments and government agencies for national security and law enforcement purposes. According to the opinion, the defendant markets and licenses a product that allows law enforcement and intelligence agencies to covertly intercept messages, take screenshots, or extract information such as a mobile device’s contacts or history. The plaintiffs (a messaging company and global social media company) sued the defendant claiming it sent malware through the messaging company’s server system to approximately 1,400 mobile devices to gather users’ information in violation of state and federal law, including the Computer Fraud and Abuse Act and the California Comprehensive Computer Data Access and Fraud Act. The defendant moved to dismiss, claiming foreign sovereign immunity protected it from the suit. The defendant further contended that even if the plaintiffs’ allegations were true, it was “acting as an agent of a foreign state, entitling it to ‘conduct-based immunity’—a common-law doctrine that protects foreign officials acting in their official capacity.” The district court disagreed, ruling that common-law foreign official immunity does not protect the defendant in this case because the defendant “failed to show that exercising jurisdiction over [the defendant] would serve to enforce a rule of law against a foreign state.”
Although the 9th Circuit agreed with the district court that the defendant, as a private company, is not entitled to immunity, the panel affirmed on separate grounds. The 9th Circuit based its determination instead on the fact that “the Foreign Sovereign Immunity Act (FSIA or Act) occupies the field of foreign sovereign immunity as applied to entities and categorically forecloses extending immunity to any entity that falls outside the FSIA’s broad definition of ‘foreign state.’” Among other things, the 9th Circuit rejected the defendant’s claim that because governments use its technology it is entitled to the immunity extended to sovereigns. “Whatever [the defendant’s] government customers do with its technology and services does not render [the defendant] an ‘agency or instrumentality of a foreign state,’ as Congress has defined that term,” the appellate court wrote. In contrast to the district court, the 9th Circuit rejected the defendant’s argument that it could claim foreign sovereign immunity under common-law immunity doctrines that apply to foreign officials (i.e., natural persons), finding that “Congress [had] displaced common-law sovereign immunity doctrine as it relates to entities.”
On June 26, the U.S. District Court for the Eastern District of Virginia approved a preliminary settlement to resolve putative class allegations against an online payday lending company and related entities (defendants) accused of issuing high interest loans through a “rent-a-tribe” lending operation. According to the class’s second amended complaint, the defendants’ “rent-a-tribe” operation was an “attempt to circumvent state and federal law by issuing high interest loans in the name of a Native American tribal business entity that purports to be shielded by the principle of tribal sovereign immunity.” The class—which consists of borrowers from throughout the U.S.—alleged that the defendants provided “financing and various lending functions” carrying “extortionately high interest rates for short-term loans” that were “far beyond legal limits,” and that the unlawful interest rates were not disclosed to borrowers during the application process. Additionally, the class alleged that the defendants failed to provide key loan terms or misrepresented the loan terms, including repayment schedules, finance charges, and the total amount of payments due. Under the terms of the settlement, the defendants will pay a $65 million cash payment, cancel $76 million in high-interest loans, and provide other non-monetary relief.
On March 6, the U.S. Court of Appeals for the 4th Circuit held that Congress did not waive sovereign immunity for lawsuits under the FCRA, affirming the lower court’s dismissal of a consumer action. According to the opinion, a consumer filed a lawsuit against the U.S. Department of Education (the Department), a student loan company, and the three major credit reporting agencies, alleging numerous claims, including violations of the FCRA for failing to properly investigate disputes that federal student loans were fraudulently opened in his name. The Department filed a motion to dismiss to the FCRA claims against it arguing the court lacked subject matter jurisdiction based upon a claim of sovereign immunity. The lower court agreed, holding Congress had not affirmatively waived sovereign immunity for suits under the FCRA.
On appeal, the 4th Circuit agreed with the lower court. The appellate court noted that, although the FCRA includes a “government or governmental subdivision or agency” as part of the definition of “person” in the statute, there is a “longstanding interpretive presumption that ‘person’ does not include the sovereign,” and that waivers of sovereign immunity need to be “unambiguous and unequivocal.” The appellate court noted that Congress waived immunity in other sections of the FCRA, which were not at issue in this case and, had Congress waived immunity for enforcement purposes under the FCRA, it would raise a new host of “befuddling” and “bizarre” issues, such as the prospect of the government bringing criminal charges against itself. Therefore, the appellate court concluded that the federal government may be a “person” under the substantive provisions, but that without a clear waiver from Congress, the federal government is still immune from lawsuits under the FCRA’s enforcement provisions.
On March 22, the U.S. District Court for the Western District of Louisiana denied the Defense Finance and Accounting Service’s (DFAS), a federal government agency within the Department of Defense, motion to dismiss a private action under the Fair Credit Reporting Act (FCRA) based on a lack of subject matter jurisdiction as a result of sovereign immunity. The court found that FCRA’s definition of person includes “government or governmental subdivision or agency,” and therefore, waives the United States’ sovereign immunity under FCRA. The court did not agree with DFAS’ position that the terms “government or governmental subdivision or agency” are too broad to constitute a wavier of sovereign immunity. In support of its position, the court cited a decision by the U.S. Court of Appeals for the 7th Circuit providing that the FCRA “unequivocally waives the United States’ sovereign immunity from damages for violations under the FCRA.”
- Buckley Webcast: Privacy and cybersecurity outlook for 2022
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Hank Asbill to discuss white collar ethics issues at the Stetson Law Review Symposium
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek
- Max Bonici to discuss “Fintech-bank partnerships and potential enforcement” at the 2022 ABA Spring Meetings
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting